GPs face £1,000 pension overpayment

GPs face paying £1,000 more than they should in pension contributions in 2008/9, according to accountants.

The Association of Independent Specialist Medical Accountants (AISMA) says 2006/7 profit tiers will be used to calculate contributions.

From 1 April 2008 contributions are variable and calculated according to the amount GPs earn. Contribution rates rise in tiers starting at 5 per cent for the lowest earners and increasing to 8.5 per cent for the highest earners (see box).

In 2008/9, the first year of the new arrangements, the tier applied will be determined by the GP's pensionable profit in 2006/7. However, GPs whose income has reduced since then, through falling practice profits or because they have reduced their hours, will still have to pay contributions based on their income from two years ago.

This means that GPs whose profits were £107,000 in 2006/7 but dropped by 5 per cent in 2007/8 to £101,650 would pay £1,016.50 more contributions than would have been expected.

This is because, based on the contribution tiers for 2007/8, the GP could expect to make contributions at the 7.5 per cent rate not 8.5 per cent.

Elizabeth Lloyd, an AISMA member and partner at Essex accountants Hubbard Lloyd, said: 'This seems odd because most practices are being asked by their PCTs to provide estimates of pensionable profits for 2008/9 so that provisional superannuation contributions can be collected. We simply don't understand why these figures can't be used to provisionally set the tiers as well.'

No adjustments will be allowed when the annual certificate of pensionable profits is prepared for 2008/9, which confirms actual earnings for 2008/9 and consequently the correct tier.

Dr Andrew Dearden, chairman of the BMA's pensions committee, blamed delays with software used by primary care organisations. He said: 'There are winners and losers. It's a one-year annoyance.'

He explained that the only alternative had been to delay the implementation of the new arrangements. But the BMA did not want to give the government the chance to rethink the retirement age.